I Don’t Know has a Certain Je Ne Sais Quoi
by Zach Marsh on Jan 24, 2020
They say wisdom and age go hand in hand. I don’t know if that is true or not, but I can say that as I’ve aged, I have become a bit wiser. One morsel of wisdom I have acquired recently is the realization that there is a lot a freedom and power in one simple three word sentence. That sentence is: I don’t know. Within that admission is the acceptance of our human condition, we are not omniscient, but we are beautifully flawed.
Now before I get too deep with this let me first clarify what I’m saying. Differing from the philosophical skepticism school of thought I am not trying to assert that nothing can be known for certain, that may or may not be the case. However, I am saying that there exists things we may never know, things that will be known to us in the future, and things that we can be certain enough at the current moment to classify as being known. As a starter, one question that nearly always requires an “I don’t know” response is one that begins with Why. Why generally requires an understanding of causation that is too complex to ascertain for certain. For example, “Why has the price of Tesla stock more than tripled in 7 months?” Answer: “I don’t know.” Certainly many people are happy to provide a narrative for why the price has risen so dramatically, but most likely these same people were not buying the stock in June last year expecting it to triple by January.
Conversely, many questions beginning with What are ones that can be answered with more certainty. “What time does the Super Bowl start?” Answer: “5:30pm Central Time.” “What are the odds that the S&P 500 will be higher next month?” Answer: “About 60%.” (Since 1927 the S&P 500 has been positive in 59.5% of all months.) Lastly, “What is a safe withdrawal rate for me to live on in retirement?” Answer: “Consider 80-90% of your portfolio’s expected rate of return as a safe assumption.” (If your portfolio’s expected rate of return is 8%, then 6.5-7% could be a decent starting place).
Another question starter that almost always requires an “I don’t know response” is one that begins with When or Will. This may sound like heresy from a financial advisor, who you look to for answers to questions like “Will I be able to retire at…?” or “When can I expect to retire?” In fact, an advisor who answers these questions with “I don’t know” may feel like confession with an agnostic priest. But in reality, it may be the most realistic answer. A more fleshed out response would be: When you retire, assuming no major changes (big assumption by the way), here’s what your retirement will look like…
Too often we try to make our retirement nest egg fit our income requirements when the safest model would be to design our retirement income to meet our nest egg’s sustainability level. Retirement planning requires a little faith. If the definition of agnosticism is limited to the understanding that nothing can be known about God’s existence, then definitionally, shouldn’t all believers be a little bit agnostic? Doesn’t faith require a touch of uncertainty? They say faith without works is dead. When we assess our retirement plans, we must take control of what we can control. How much we save, or how much we spend are our controllable inputs into the plan. When returns come and in what sequence they occur requires a bit of faith.
The more I practice the I don’t know philosophy the more I like it. I’m not sure those around me are digging it as much as I am, most notably my kids, but it sure gives me some more freedom.
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